Monday, 4 March 2013

Kenanga Research - On Our Portfolio - A better sentiment ahead?

Reversing the
sluggish market sentiment of the past few weeks, the local bourse witnessed
some bargain hunting last week as investors picked up some defensive heavyweights.
All three of our model portfolios recovered quicker than the benchmark index
last week, outperforming by 65-102bps WoW or 131-234bps on a YTD basis. The
THEMATIC Portfolio was the better performer with its total YTD unrealised loss
reduced to RM514 or -0.62%. The GROWTH and DIVIDEND YIELD Portfolios also
reported narrowing YTD unrealised losses to RM751 (-1.13%) and RM1,103 (-1.65%)
respectively against the FBMKLCI, which declined 2.96% for the YTD.
Technically, the benchmark index’s channel breakout last week was a positive
sign although the election jitters may continue to cap the upside for prices
still.

Overall sentiment
improves. After weeks of lagging behind the regional peers, the local market
played a catch-up, which saw the benchmark FBMKLCI index gaining by 15.36 pts
or 0.95% WoW to settle at 1,637.44. Investors returned to the market, after
weeks of consolidation, where they bargained hunt for defensive names like
PPBANK (+36 sen), CIMB (+19 sen) and BAT (+RM3.00). Buying interest were also
seen in GENTING (+13 sen) and GENM (unch) ahead of their earnings
announcements. Post-results, investors continued to pick up GENTING on the
improved prospects for GENS. Last week, a total of 67 companies that we tracked
released their earnings with 55% of them matching expectations, 15% above and
30% below. On the international front, the US market has continued to rise higher,
fuelled by a string of positive economic data and corporate earnings surprises.
Technically, the FBMKLCI’s channel breakout last Thursday gave us a sense that
investors are returning to risky assets, possibly due to the positive earnings
in blue chips like MAYBANK (+3 sen) and TM (+9 sen). However, election jitters
may cap the upside for prices still.

GROWTH Portfolio
takes the WoW lead. Reacting to the positive market sentiment last week,
all three of our Portfolios posted gains WoW which outperformed the benchmark index.
The GROWTH Portfolio posted the higher return of 1.97% WoW or RM1,310 in unrealised
profit, narrowing its YTD unrealised loss to RM751 or -1.13%. The investment value
of the DIVIDEND YIELD Portfolio improved RM1,140 or +1.60% WoW, attributable to
FABER (+RM400 unrealised profit, +3.50%) after its 4Q12 earnings beat forecast.
This brought down the portfolio’s YTD unrealised loss to RM1,103 or -1.65%. The
THEMATIC Portfolio’s investment value rose 1.60% WoW or RM1,330, bringing down
its YTD unrealised loss to RM514 or -0.62%. For the YTD, the FBMKLCI reported a
total return of -2.96%. Stock price performance-wise, besides FABER, TOMYPAK
was the star performer, contributing 4% gain each for both the GROWTH and
DIVIDEND YIELD Portfolios after the packaging company reported FY12 earnings
that surged 51% YoY.

4QCY12 results for
our invested stocks were mixed. A total of nine companies reported their
respective 4QCY12 results in February with mixed results as their performances
compared to either being above, in line or below their forecasts were equally spread.
MAYBANK, TM and FABER reported above-expected earnings while results for UOADEV,
GUINNESS, and TOMYPAK were within our expectations. However, HOVID’s 2Q13 earnings
fell short of our forecast due to a higher operating cost while PUNCAK’s 4Q12 results
were also hit by the same factor, resulting in its FY12 results being 18% below
our estimate. Meanwhile, a unexpectedly higher prize payout hit MPHB’s 4Q12
bottom line, causing its FY12 results to be 9% below our forecasts. On the
other hand, TM’s FY12 results met our expectations, although the absence of a
special dividend from it was somewhat disappointing.

Moving to March 2013.
We expect REDTONE to announce further details or positive developments on its
NAS agreement that it inked with MAXIS last July. Meanwhile, GAMUDA, one of our
core holdings in both the THEMATIC and GROWTH Portfolios, is expected to release
its 2Q13 result in late March. All in all, we believe the key event to watch in
March will be the news and progress of the upcoming 13th General Election,
which will provide the early indications for the market direction in the next
few months.